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Second year production 1

► What Is Operations
 Operations management (OM) is the set of activities that
create value in the form of goods and services by transforming
inputs into outputs
 Production is the creation of goods and services

 We find productive processes in all kinds of organized activities

such as factories, offices, supermarkets, and hospitals.
 Production and operations management deals with decision
making related to productive processes to ensure that the
resulting goods or services are produced according to
specifications, in the amounts and by the schedule
required, and at minimum cost.
 It also has another names such as pm, pom and om.

► Organizing to Produce Goods

and Services
 Essential functions:
1. Marketing – generates demand
2. Production/operations – creates the product
3. Finance/accounting – tracks how well the organization
is doing, pays bills, collects the money

 Organizational Charts

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► The Supply Chain

 A global network of organizations and activities that supply
a firm with goods and services
 Members of the supply chain collaborate to achieve high
levels of customer satisfaction, efficiency and competitive


There are three phases to the flow of materials. Raw materials
flow into a manufacturing company from a physical supply
system, they are processed by manufacturing, and finally finished
goods are distributed to end consumers through a physical
distribution system. Figure shows this system graphically.

► Why Study OM?

1. OM is one of three major functions of any organization, we
want to study how people organize themselves for productive
2. We want (and need) to know how goods and services are
3. We want to understand what operations managers do
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4. OM is such a costly part of an organization

 Options for Increasing Contribution

► The Strategic Decisions for OM :

1. Design of goods and services
▶ Defines what is required of operations
▶ Product design determines quality, sustainability and human
2. Managing quality
▶ Determine the customer’s quality expectations
▶ Establish policies and procedures to identify and achieve
that quality
3. Process and capacity design
▶ How is a good or service produced?
▶ Commits management to specific technology, quality,
resources, and investment.
4. Location strategy
▶ Nearness to customers, suppliers, and talent.
▶ Considering costs, infrastructure, logistics, and government.
5. Layout strategy
▶ Integrate capacity needs, personnel levels, technology, and
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▶ Determine the efficient flow of materials, people, and

6. Human resources and job design
▶ Recruit, motivate, and retain personnel with the required
talent and skills.
▶ Integral and expensive part of the total system design.
7. Supply-chain management
▶ Integrate supply chain into the firm’s strategy.
▶ Determine what is to be purchased, from whom, and under
what conditions.
8. Inventory management
▶ Inventory ordering and holding decisions.
▶ Optimize considering customer satisfaction, supplier
capability, and production schedules.
9. Scheduling
▶ Determine and implement intermediate- and short-term
▶ Utilize personnel and facilities while meeting customer
10. Maintenance
▶ Consider facility capacity, production demands, and
▶ Maintain a reliable and stable process.

► What is the difference between

Manufacturing Operations and
Service Operations?

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► Productivity

Is the ratio of outputs to inputs.

 Total factor productivity is the ratio of all outputs to all

 Outputs relative to one, two, or three of these inputs labor,
capital, materials, or energy are partial measures of productivity.

 Output per labor hour, often called labor productivity or labor

efficiency, is probably the most common partial measure of

 The terms productivity and efficiency (normally stated as a

percentage) are used interchangeably. These terms are
performance measures.

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1. Determine the productivity for these cases:

2. Assume two workers paints twenty four table in eight hour. What
is the productivity?

3. 200 unit produced and sell for 12$ , each of labor were required
10$ per hour(40 hour) , the material cost 6.5$ per unit , what is
the productivity ?

4. A wrapping-paper company produced 2,000 rolls of paper

one day. Labor cost was $160, material cost was $50, and
overhead was $320. Determine the multifactor

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 Have fun :D

1. A health club has two employees who work on lead

generation. Each employee works 40 hours a week, and
is paid $20 an hour. Each employee identifies an
average of 400 possible leads a week from a list of
8,000 names. Approximately 10 percent of the leads
become members and pay a onetime fee of $100.
Material costs are $130 per week, and overhead costs
are $1,000 per week. Calculate the multifactor
productivity for this operation in fees generated per
dollar of input.

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2. A catering company prepared and served 300 meals at

an anniversary celebration last week using eight
workers. The week before, six workers prepared and
served 240 meals at a wedding reception. For which
event was the labor productivity higher? Explain.

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